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In an unknown location in the NepaleseHimalayas, a young monk (played by Siddhartha) is about to be crowned the Rimpoche of the monastery, when a gang of black magicians led by an unnamed character (played by Puneet Issar) kidnap him. It is revealed that the leader of the black magicians wishes to make a human sacrifice of the Rimpoche to attain invincibility. The other monks in the monastery understand that the Rimpoche's saviour will arrive from across the Himalayas to rescue him from the clutches of the black magicians. In the meantime, the young Rimpoche manages to escape from the clutches of the magicians and runs away to Kathmandu.

At the other end of the subcontinent, in a small village in Kerala, Ashokan (Mohanlal) is an unemployed youth who, with the other members of his club, whiles his time away competing with his cousin Appukuttan (Jagathi Sreekumar) and his club in a series of trivial competitions. Appukuttan finds himself on the losing side every time, adding to his insecurity complex, which leads him to suspect Ashokan of having an affair with his (Appukuttan's) fiancée Damayanti (played by Urvashi).

When an astrologer predicts to his mother, Sumathi (played by Sukumari), that Ashokan is likely to commit a murder if he remains in Kerala, Ashokan is bundled away to Nepal to stay with his uncle Captain (retired) Krishnankutty Menon (M. S. Thripunithura), whom he hasn't met since childhood. Unbeknownst to Ashokan, Appukuttan flies to Nepal beforehand and establishes himself in Krishanankutty Menon's (Kutty Mama) house, masquerading as Ashokan. Ashokan is cast out onto the streets of Kathmandu, where he meets the Rimpoche and forms a friendship with the young lad.

Dharam Yoddha, the poster of Hindi dubbed version of Yoddha.

Appukuttan attempts to connive his way into marrying Kutty Mama's daughter, Ashwati (Madhoo) — a researcher into Nepalese traditions and black magic at a university in Kathmandu. But Ashokan, with the Rimpoche's assistance, manages to cast doubt into the mind of Kutty Mama and win over Ashwati.

Ashokan and Ashwati then witness one of the black magician's minions kidnapping the Rimpoche. Upon following the kidnapper, they end up confronting the black magician himself. In the ensuing melee, the magician grievously wounds Ashwati and blinds Ashokan, and leaves the two of them to their deaths in the forest. Both of them are rescued by the adivasi tribe tasked with protecting the Rimpoche's monastery. Ashokan is then told of how he is the Chosen One and is trained by an adivasi teacher to overcome his blindness and become a warrior tasked with rescuing the Rimpoche.

In the meantime, the jealous and suspicious Appukuttan follows Ashwati and Ashokan into the forest and is captured by a tribe of adivasis who torture him.

Ashokan then ventures into the magician's hideout, rescues the Rimpoche, and brings him back to the monastery. The Rimpoche then, aided by an ailing old monk, restores Ashokan's eyesight. As the solar eclipse nears, the monks begin the coronation of the Rimpoche. The black magician rushes to the monastery to kill the Rimpoche before he is crowned. But Ashokan stands in the black magician's way and, in the climactic fight, kills the latter.

Ashokan then discovers that Ashwati is not dead as he had previously feared. Appukuttan makes a final appearance, trained as a warrior by the adivasis who captured and tortured him. In the comical fight that ensues, Appukuttan is beaten up by Ashokan.

The idea of Yodha initially popped in director Sangeeth Sivan's mind when he planned to make a martial arts movie like The 36th Chamber of Shaolin. The nearest place where Buddhism existed was Nepal and he, along with cinematographer Santhosh Sivan made a trip to Nepal. There they came to know more about Living Goddess of Nepal who is worshipped like a Devi and also about the Evil forces "Bokshas", who are out to destroy the Goddess. Coupled with the tantric nature of Hinduism (sacrifices & other rituals), they realized that they had got the apt plot device for a mainstream cinema. After they had returned from Nepal, they decided that the story must carry Living Goddess, Bokshas & Monks. The movie, "The Golden Child" inspired the director to replace Living Goddess with Living God. The kidnapping of the Lama boy and the arrival of the savior was inspired from the movie. In the original, the savior and boy doesn’t meet while Yodha was more about the interactions between them. The negative element was based on Bokshas. Yodha, gives references of local martial arts, Kalaripayattu during the Kerala sequences along with the Kungfu.

Sangeeth Sivan recalls that scripting was one of the most challenging aspects of the project. Mohanlal suggested the acclaimed T. Damodaran, who had subsequently pitched in an initial draft. Unfortunately, the draft contrasted from the Sivan's ideas. Sivan then articulated his ideas of how the film begins with the planned visual transitions. After a few moments of silence, T. Damodaran replied, "If what I have written is "Day", what I just heard is "Night". It is extremely contrasting and believe me, you are the best person to write this movie". Sangeeth Sivan explains "Based on his advice I, Alex Kadavil & Santhosh (whenever he would be free) would jot down pointers. Since we weren’t writers (despite of having some good ideas), we required the services of a writer who would thread it all together seamlessly. That is when Sasi (Sashidharan Aaratuvazhy) came in. He heard the narration and came back with the Kerala portions which we loved and thus he was signed on to the project. The combined effort finally gave me what I demanded."

Initially the film was titled "Buddha". But it created some tensions from the Buddhist community which enforced the change to "Yodha".

Sangeeth Sivan revealed in his Facebook page that, he thought of only Mohanlal, and no other actor for the lead role. "Even today I believe none can justify the role other than Lal Sir. In fact he was one of the first few people who was part of this movie before the scripting process commenced", he added. "Despite of known for zero preparation prior to shot/movie, he religiously worked hard to prepare himself under a martial arts teacher we arranged. Since Lal sir’s character was in Nepal, we wanted the local attire. We worked on the styling of Lal Sir’s attire when he becomes Yodha which was slightly inspired from Amitji’s "Kudha Gawah". The casting of Jagathy Sreekumar, M S Thripunithara, Meena, Sukumari, Jaganadhan Varma, Madhoo & Urvashi followed without much debate. Their performance made me realize the brilliance of our actors. Urvashi, in particular, left a mark despite of very few scenes. Puneeth Issar was already a big name all over India after his portrayal of Duryodhan in Mahabharath Series. I believe this was one of the smartest as well as trickiest decisions for me as a director since the character literally didn’t have any lines. It was all about physical presence. Puneeth was able to provide the menacing look to the character and his first shot in the movie registered the image in audience’s mind. Also his knowledge in the field of martial arts along with Arif’s styling gave the character apt look. The lady who played the role of sorceress was chosen because of her interesting eyes (which we focused during the movie). Last but not least, Siddharth who played the role of "Rimpoche". During the casting of monks, we demanded the actors to tonsure and coincidentally we saw Siddharth, who had the thickest mop of hair. Once we laid our demand, he nonchalantly agreed and thus we got our Rimpoche. His father played the role of the guy whom Puneeth summons to bring back the kid (who acted in the cave fight sequence with Lal Sir) while his grandfather played one of the monks", explained Sivan.

Yodha was made with a budget of about 2cr,which was unusual and huge for a malayalam movie at that time.Still the movie had a collection nearing 4cr which was phenomenal then.The movie was an Onam release of 1992 and a commercial success. The film was a super hit at boxoffice.Though having collections of Block buster standard,the huge budget limited it with super hit status,the film had a run of about 125 days at the box office and now has a major cult following. Jagathy Sreekumar was highly appreciated for his funny and quick witted portrayal of the jealous cousin of the hero and his combination scenes with Mohanlal is still considered as one of the best comedy scenes in the history of Malayalam films. Yodha along with Nadodikattu,Kilukkam, In Harihar Nagar, Godfather,Chandraleka and Ramji Rao Speaking is considered as one of the best comedy films in the history of Malayalam movie industry.

The original score and songs were composed by A. R. Rahman; the lyrics were penned by Bichu Thirumala. This is the only released Malayalam movie for which Rahman has composed the music so far.

The soundtrack was also released in Tamil (as Asokan), Hindi (as Dharam Yoddha) and Telugu (as Yoddha). The respective soundtracks featured versions of all songs except "Mamboove", which was not featured in the film. "Mamboove" was later reused for the Tamil movie Pavithra as "Sevvanam". The lyrics were written by Vairamuthu, P. K. Mishra and Veturi respectively for the Tamil, Hindi and Telugu versions. The Hindi version was added with five songs composed by Pappu Khan.

The soundtrack was met with positive responses upon release. The track "Padakali" is often considered one of the most popular songs ever in the Malayalam film history. Besides the tune of the song, the tongue twisting lyrics by Bichu Thirumala and choreography by Kumar were noticed.[citation needed]

The original soundtrack was released by Tharangini in 1992, then the Tamil dubbed version, Asokan by Pyramid in 1994, the Hindi version by BMG Crescendo in 1996 and the Telugu version in 1995. The Hindi version was re-released in 1997 with five new songs added.